CROYDON COMMENTARY: Delays in delivering Brick by Brick developments could have costly impact. With help from several Freedom of Information requests, NICHOLAS PANES has crunched some figures and found serious cause for concern
Last week, it was reported that slow progress being made by Brick by Brick, Croydon’s wholly owned housing developer, has created a £63million “slippage” in the council’s already under-pressure budget.
Such delays to the development programme are welcome in the context of the financial ruin which might ensue if the building programme had been met.
Following the release of the Brick by Brick business plan, several Freedom of Information requests were submitted expressing concerns about the financial burden imposed on Croydon Council as a whole by the cost of Brick by Brick development schemes. The business plan suggested that around £140million would be borrowed by the council to fund the existing development programme – representing around one-third of all the assets of Croydon Council.
However the answers reveal that at the point of peak borrowing, Croydon Council will have invested equity and loans totalling £212million in Brick by Brick.
The council was asked by how much the figures would increase if a three-month delay to sales was built in to the Brick by Brick business plan. Their answer, that overall borrowing would not change as it would merely be a timing difference, misses the point that this could increase short-term gearing – the ratio of borrowings to net assets – considerably.
The Brick by Brick business plan shows that nearly £88million of sales proceeds will be received in 2018-2019. As no sites are due to complete before December 2018, this sum may be a fair estimate of the increase in borrowings if sales are delayed by three months.
The answers provide a fairly horrific picture.
Peak borrowings of £212million could increase to anything up to £300million if sales are delayed – this compares with the overall net assets of Croydon Council of £409million at the last accounting date.
In short, the development programme is large enough to threaten the financial stability of the council itself.
Croydon Council Tax-payers are funding a property development company – a high-risk venture. The figures from the Brick by Brick business plan were based on the first 1,000 homes to be built by Brick by Brick; since receiving those figures through FoI, the council has agreed plans for a further 2,000 Brick by Brick homes.
Despite the high borrowings inherent in the first phase of the business plan, the council says that they have not set an overall cap for the amount the council will borrow.
This must be a grossly negligent and careless way of looking after public money.
- Nicholas Panes is a former finance director of a PLC with experience of residential and commercial property development
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